In this study we examined the different aspects of the pathway leading to the differentiation of keratinocytes as a function of time in culture and calcium concentration of the culture medium. Human neonatal foreskin keratinocytes were grown in a serum-free, defined medium containing 0.07, 1.2, or 2.4 mM calcium and assayed for the rate of growth and protein synthesis, involucrin content, transglutaminase activity, and cornified envelope formation at preconfluent, confluent, and postconfluent stages of growth. We observed that keratinocytes grown to postconfluence in all calcium concentrations showed an increased protein/DNA ratio and an increased rate of membrane-associated protein synthesis. Extracellular calcium concentrations did not have a clear influence on these parameters. However, preconfluent and confluent keratinocytes grown in 0.07 mM calcium showed markedly retarded differentiation at all steps, i.e., involucrin synthesis, transglutaminase activity, and cornified envelope formation. Within 1 week after achieving confluence, these keratinocytes began synthesizing involucrin and transglutaminase and developed the ability to form cornified envelopes. Cells grown in 1.2 and 2.4 mM calcium synthesized involucrin and transglutaminase prior to confluence and were fully competent to form cornified envelopes by confluence. Thus external calcium-regulated keratinocyte differentiation is not an all or none phenomenon, but rather it is the rate at which keratinocytes differentiate that is controlled by calcium. We conclude that either or both higher extracellular calcium concentration and the achievement of cell-cell contacts lead to a coordinate increase of at least two precursors--involucrin content and transglutaminase activity--required for cornified envelope formation. We speculate that a critical level of cytosolic calcium, achieved by increased extracellular calcium or by achievement of intercellular communication established by cell-cell contact, may trigger mechanisms required for initiation of keratinocyte differentiation.